UNITED STATES PATENT AND TRADEMARK OFFICE
`_____________________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`_____________________
`
`
`
`COALITION FOR AFFORDABLE DRUGS II LLC
`Petitioner
`
`v.
`
`
`
`NPS PHARMACEUTICALS, INC.
`Patent Owner
`
`_____________________
`
`Case No. IPR2015-00990 and IPR2015-010931
`
`Patent No. 7,056,886
`_____________________
`
`
`
`PETITIONER’S BRIEF IN RESPONSE TO THE BOARD’S REQUEST
`FOR ADDITIONAL BRIEFING PURSUANT TO 37 C.F.R. § 42.20(d)
`
`
`
`
`
`1 Per the Board’s Order, the word-for-word identical paper is filed in each
`proceeding identified in the heading.
`
`
`
`
`
`
`_____________________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`_____________________
`
`
`
`COALITION FOR AFFORDABLE DRUGS II LLC
`Petitioner
`
`v.
`
`
`
`NPS PHARMACEUTICALS, INC.
`Patent Owner
`
`_____________________
`
`Case No. IPR2015-00990 and IPR2015-010931
`
`Patent No. 7,056,886
`_____________________
`
`
`
`PETITIONER’S BRIEF IN RESPONSE TO THE BOARD’S REQUEST
`FOR ADDITIONAL BRIEFING PURSUANT TO 37 C.F.R. § 42.20(d)
`
`
`
`
`
`1 Per the Board’s Order, the word-for-word identical paper is filed in each
`proceeding identified in the heading.
`
`
`
`
`
`
`
`
`INTRODUCTION .......................................................................................... 1
`
`ARGUMENT ................................................................................................. 2
`
`I.
`
`TABLE OF CONTENTS
`
`CFAD Has Standing to Bring This IPR ............................................... 2
`
`A.
`
`
`B.
`
`The Statute and Regulation Regarding Standing Plainly
`Permit CFAD to Pursue Its Petition ........................................... 2
`
`PO’s Misleading Citation to Legislative History Does Not Show that
`Congress Created IPR Exclusively as an Alternative to Litigation, and
`Does Not Bar this Petition .......................................................... 4
`
`The Noerr-Pennington Doctrine Bars PO’s Sanctions Claim .............. 5
`
`A.
`
`
`
`B.
`
`
`
`The Noerr-Pennington Doctrine, Based on the First
`Amendment, Protects CFAD’s Right to Bring an IPR
`Petition ........................................................................................ 5
`
`PO Has Failed to Establish That CFAD’s Petition Falls
`Within the Narrow Sham Exception to the Noerr-Pennington
`Doctrine ...................................................................................... 7
`
`
`
`
`
`
`
`
`II.
`
`
`
`
`
`
`
`
`
`
`
`
`
`C.
`
`PO’s Claims Are Legally Deficient in Other Respects ............ 11
`
`
`III. Dismissal of this Proceeding as a Sanction Would Be Arbitrary and
`
`Capricious and would Violate Due Process ....................................... 12
`
`IV. The Social Benefits/Costs Favor Addressing the Merits of Petitions Seeking
`to Invalidate Poor-Quality Patents ………………………………...…13
`
`A.
`
`
`The Supreme Court and Congress Have Recognized the Strong
`Public Interest in Invalidating Poor-Quality Patents…………..13
`
`B. Members of the Public Have Expressed a Strong Interest in
`
`Invalidating Poor-Quality Pharmaceutical Patents through
`
`IPR……………………………………………………………...14
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`i
`
`
`
`CONCLUSION………..…………………………………………………….15
`
`
`CERTIFICATION OF SERVICE………………..………………………….17
`
`CERTIFICATIONOF
`
`
`
`
`
`
`
`ii
`
`
`
`TABLE OF AUTHORITIES
`
`
`Cases
`
`Abbott Labs. v. Brennan,
`
`952 F.2d 1346 (Fed. Cir. 1991) ............................................................ 6
`
`Bill Johnson’s Restaurants, Inc. v. National Labor Relations Board,
`
`461 U.S. 731 (1983).............................................................................. 7
`
`Cal. Motor Transp. Co. v. Trucking Unlimited,
`
`404 U.S. 508 (1972).............................................................................. 6
`
`Consumer Watchdog v. WARF,
`
`753 F.3d 1258 (2014) ........................................................................... 5
`
`Dep’t of Homeland Sec. v. MacLean,
`
`135 S.Ct. 913 (2015) ............................................................................. 3
`
`Dot Hill Sys. Corp. v. Crossroads Sys., Inc.,
`
`IPR2015-00822, Paper 18 (PTAB Sept. 17, 2015) .............................. 4
`
`E.R.R. Presidents Conference v. Noerr Motor Freight, Inc.,
`
`365 U.S. 127 (1961).............................................................................. 6
`
`FilmTec Corp. v. Hydranautics,
`
`67 F.3d 931 (Fed. Cir. 1995) ................................................................ 7
`
`Halliburton Co. v. Erica P. John Fund, Inc.,
`
`134 S. Ct. 2398 (2014) .......................................................................... 9
`
`In re Applications of High Plains Wireless, L.P.,
`
`15 F.C.C. Rcd. 4620 (2000) ................................................................ 12
`
`Killip v. Office of Personnel Mgmt.,
`
`991 F.2d 1564 (Fed. Cir. 1993) ............................................................ 3
`
`Lear v. Adkins,
`
`395 U.S. 653 (1969).................................................................... 1,13,15
`
`
`
`
`iii
`
`
`
`Loral Space & Communications, Inc. v. Viasat, Inc.,
`
`IPR2014-00236, IPR2014-00239, IPR2014-00240,
`
`Paper 9 (PTAB July 7, 2014) ................................................................ 5
`
`Nader v. Democratic Nat’l Comm.,
`
`555 F.Supp.2d 137 (D.D.C. 2008) ................................................ 6,7,10
`
`Pope Manufacturing Co. v. Gormully,
`
`144 U.S. 224 (1892)............................................................................ 13
`
`Prof’l Real Estate Investors, Inc. (“PRE”) v. Columbia Pictures Indus.,
`
`508 U.S. 49 (1993) ................................................................................ 7
`
`Proportion-Air, Inc. v. Buzmatics,
`
`57 F.3d 1085, 1995 U.S. App. LEXIS 25871
`
`(Fed. Cir. 1995) ..................................................................................... 6
`
`Russello v. United States,
`
`464 U.S. 16 (1983) ................................................................................ 4
`
`Satellite Broadcasting Co. v. FCC,
`
`824 F.2d 1 (D.C. Cir. 1987) ................................................................ 12
`
`SmithKline Beecham Corp. v. Apotex Corp.,
`
`403 F.3d 1331 (Fed. Cir. 2005) .......................................................... 13
`
`WestLake Services, LLC, v. Credit Acceptance Corp.,
`Case CBM2014-00176, paper 41 (PTAB Sept. 15, 2015) ................... 5
`
`
`Other Authorities
`
`U.S. Const. Amend. I. .................................................................................... 6
`
`37 C.F.R. § 42.12(7) ..................................................................................... 11
`
`37 C.F.R. § 42.101 .......................................................................................... 2
`
`35 U.S.C. § 311(pre-AIA) ............................................................................... 2
`
`35 U.S.C. § 311(a) ....................................................................................... 2,4
`
`
`
`iv
`
`
`
`35 U.S.C. § 316(a) .......................................................................................... 3
`
`35 U.S.C. § 316(a)(6) ...................................................................................... 3
`
`157 Cong. Rec. S5402, S5409 (Sept. 8, 2011) ............................................. 13
`
`Administrative Procedure Act (5 U.S.C. Subchapter II) .............................. 13
`
`Leahy-Smith America Invents Act § 8(a)(1)(B),
`112 P.L. 29, 125 Stat. 284 ............................................................................... 2
`
`Restatement (second) of Torts §682 (1977) ................................................. 11
`
`Securities Exchange Commission, Amendments to Regulation SHO, Final Rule,
`Rel. No. 34-61595 (February 26, 2010) ........................................................ 10
`
`
`
`v
`
`
`
`INTRODUCTION
`
`This Board’s invitation for briefing sought guidance on the pertinent facts
`
`and relevant law. Patent Owner (“PO”), however, took it as an invitation to toss
`
`about serious claims of wrongdoing without alleging, let alone establishing, the
`
`underlying facts and law to support such claims. PO’s brief claim fails because it
`
`hinges on the false and wholly unsupported premise that the Coalition for
`
`Affordable Drugs II LLC (“Petitioner” or “CFAD”) misrepresented GATTEX’s
`
`patent exclusivity to drive down the price of PO stock and engaged in securities
`
`fraud. Contrary to PO’s argument, the First Amendment of the Constitution,
`
`statutes, regulations, unambiguous black letter law (including Supreme Court
`
`precedent), and expert testimony demonstrate CFAD’s right to bring this petition
`
`for IPR and have the merits reached.
`
`
`
`PO faults CFAD for having an economic motivation, but the Supreme Court
`
`has found a strong public interest in having economically motivated actors
`
`challenge the validity of patents, which inures to the benefit of the public. See, e.g.,
`
`Lear v. Adkins, 395 U.S. 653, 670 (1969). An economic motive for petitioning the
`
`government simply does not turn the petition into an abuse of process.
`
`There is also a strong public interest in removing poor-quality patents from
`
`the public arena. Poor-quality pharmaceutical patents, like PO’s, allow PO to
`
`charge inflated drug prices (over $300,000 per patient per year for GATTEX) and
`
`
`
`1
`
`
`
`delay market entry of more affordable generic drugs, to the detriment of all
`
`patients and society. Thus, CFAD’s petition should be addressed on its merits so
`
`that the challenged patent cannot wrongly be used to block competition.
`
`ARGUMENT
`
`CFAD Has Standing to Bring This IPR
`
`A.
`
`The Statute and Regulation Regarding Standing Plainly Permit
`CFAD to Pursue Its Petition
`
`
`The language of 35 U.S.C. § 311(a) is plain and unambiguous. It authorizes
`
`I.
`
`
`
`
`any “person who is not the owner of a patent [to] file with the Office a petition to
`
`institute an inter partes review of the patent.” 35 U.S.C. § 311(a); see also 37
`
`C.F.R. § 42.101 (2015). This standing requirement is consistent with that of the
`
`inter partes reexamination process it replaced, which permitted “[a]ny third-party
`
`requester at any time [to] file a request for inter partes reexamination.” 35 U.S.C.
`
`§ 311 (pre-AIA). There simply are no applicable statutes, regulations or rules
`
`limiting IPR standing in any way.
`
`In contrast, Covered Business Method review (“CBM”) standing is limited
`
`to a “person or the person’s real party in interest or privy [that] has been sued for
`
`infringement of the patent or has been charged with infringement under that
`
`patent.” Leahy-Smith America Invents Act § 8(a)(1)(B), 112 P.L. 29, 125 Stat.
`
`284, 330; 37 CFR § 42.302 (2015). The different standing requirements of these
`
`related sections of the AIA are significant because “Congress generally acts
`
`
`
`2
`
`
`
`intentionally when it uses particular language in one section of a statute but omits
`
`it in another.” Dep’t of Homeland Sec. v. Maclean, 135 S.Ct. 913, 919 (2015).
`
`This interpretative canon applies with particular force when the statutes or
`
`regulations are part of the same statutory scheme, as here. Maclean, 135 S. Ct. at
`
`919.
`
`Rather than relying on the proper statutory standing provision, PO instead
`
`obfuscates the issue by directing the Board to another provision. PO baldly asserts
`
`that 35 U.S.C. § 316(a)(6) means “[s]omeone who brings an IPR for an improper
`
`purpose cannot have standing.” (PO Br. at p. 10.) PO misstates the statute. Section
`
`316(a)(6) does not limit standing, but rather is Congress’ authorization for the
`
`“Director” of the PTO to “prescribe regulations.” 35 U.S.C. § 316(a). PO cannot,
`
`however, cite any “regulation” that “prescribes” any sanctions. Congress may have
`
`authorized the PTO to prescribe sanctions in the regulations, but the PTO has not
`
`done so. Thus, section 316(a)(6) only confirms that the PTO’s ability to sanction
`
`Petitioner for abuse of process must be through regulations—regulations which do
`
`not exist. If the PTO wishes to prescribe such regulations, it may only be
`
`implemented through a process that comports with due process—not on a case by
`
`case basis.
`
`Moreover, this “agency is but a creature of statute.” Killip v. Office of
`
`Personnel Mgmt., 991 F.2d 1564, 1569 (Fed. Cir. 1993.). “Though an agency may
`
`
`
`3
`
`
`
`promulgate rules and regulations pursuant to authority granted by Congress, no
`
`such rule or regulation can confer on the agency any greater authority than that
`
`conferred under the governing statute.” Id. In an analogous case, the Board denied
`
`a patent owner’s effort to dismiss an IPR petition for contractual estoppel because
`
`it found “no explicit [statutory] provision . . . precluding institution of an inter
`
`partes review” on that basis. Dot Hill Sys. Corp. v. Crossroads Sys., Inc., IPR2015-
`
`00822, Paper 18 at 8 (PTAB Sept. 17, 2015) Similarly here, there is nothing in the
`
`express statutory grant from Congress that permits the PTO to promulgate standing
`
`requirements more restrictive than those conferred by §311(a).
`
`B.
`
`PO’s Misleading Citation to Legislative History Does Not Show
`that Congress Created IPR Exclusively as an Alternative to
`Litigation, and Does Not Bar this Petition.
`
`
`Finding no support in the statute, PO resorts to selective and misleading
`
`
`
`reference to inapplicable legislative history. This misdirection should be
`
`disregarded. When “the statutory language is unambiguous, in the absence of a
`
`clearly expressed legislative intent to the contrary, that language must ordinarily be
`
`regarded as conclusive.” Russello v. United States, 464 U.S. 16, 20 (1983) (internal
`
`quotations omitted). Accordingly, the legislative history cannot be invoked to
`
`ignore the plain, unambiguous meaning of § 311(a).
`
`
`
`Moreover, even considering the legislative history, it does not support PO’s
`
`argument that Congress created IPR exclusively as an alternative to litigation, or
`
`
`
`4
`
`
`
`otherwise intended to bar petitions like CFAD’s. Contrary to PO’s position, the
`
`Board has held that “[i]nter partes review is not a substitute for district court
`
`litigation.” Loral Space & Communications, Inc. v. Viasat, Inc., IPR2014-00236,
`
`IPR2014-00239, IPR2014-00240, Paper 9 at 7 (PTAB July 7, 2014). Had Congress
`
`meant to limit IPRs as PO suggests, it could have done so. Notably, it did not.
`
`
`
`PO’s citation to Consumer Watchdog for the proposition that CFAD has no
`
`legal rights here is inapposite. (PO Br. at 14.) In Consumer Watchdog v. WARF,
`
`753 F.3d 1258 (Fed. Cir. 2014), the Federal Circuit held that although the plaintiff
`
`had standing to bring an inter partes reexamination, it did not have Article III
`
`standing on appeal. As the Board in WestLake Services, LLC, v. Credit Acceptance
`
`Corp., Case CBM2014-00176, paper 41 at 4 (PTAB Sept. 15, 2015) explained,
`
`standing in an administrative agency is determined by “the statute that confers
`
`standing before the agency” and “Article III case-or-controversy considerations do
`
`not apply to administrative proceedings.” Thus, CFAD has standing to bring a
`
`petition for IPR pursuant to the statute. Consumer Watchdog does not hold
`
`otherwise.
`
`II. The Noerr-Pennington Doctrine Bars PO’s Sanctions Claim
`
`
`A.
`
`The Noerr-Pennington Doctrine, Based on the First Amendment,
`Protects CFAD’s Right to Bring an IPR Petition
`
`
`CFAD’s right to file a petition for IPR is strongly reinforced by the
`
`
`
`protections it is afforded by the U.S. Constitution and the Supreme Court’s related
`
`
`
`5
`
`
`
`Noerr-Pennington doctrine. The First Amendment prohibits laws “abridging the
`
`right of the people . . . to petition the government for redress of grievances,” and
`
`gives safe harbor to all genuine efforts to influence government decisions. U.S.
`
`Const. Amend. I. Similarly, the “Noerr-Pennington doctrine holds that defendants
`
`who petition the government for redress of grievances, ‘whether by efforts to
`
`influence legislative or executive action or by seeking redress in court,’ are
`
`immune from liability for such activity under the First Amendment.” Nader v.
`
`Democratic Nat’l Comm., 555 F. Supp. 2d 137, 156 (D.D.C. 2008) (citing E.R.R.
`
`Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 138 (1961)).
`
`
`
`Noerr-Pennington’s reach has been extended to include “common-law torts
`
`such as malicious prosecution and abuse of process.” Nader, 555 F. Supp. 2d at
`
`157 (dismissing abuse of process claim under Noerr-Pennington); Proportion-Air,
`
`Inc. v. Buzmatics, 57 F.3d 1085, 1995 U.S. App. LEXIS 25871, *4-*6 (Fed. Cir.
`
`1995) (unpublished) (applying Noerr-Pennington doctrine to abuse of process
`
`claims). The doctrine’s immunity applies to federal agency proceedings, including
`
`those before the USPTO. Cal. Motor Transp. Co. v. Trucking Unlimited, 404 U.S.
`
`508, 511 (1972) (extending Noerr-Pennington “to administrative agencies and
`
`holding Noerr applies regardless of “intent or purpose”); Abbott Labs. v. Brennan,
`
`952 F.2d 1346, 1355-56 (Fed. Cir. 1991) (applying doctrine to PTO proceeding).
`
`
`
`
`
`6
`
`
`
`
`
`
`
`B.
`
`PO Has Failed to Establish That CFAD’s Petition Falls Within the
`Narrow Sham Exception to the Noerr-Pennington Doctrine
`
`
`Noerr-Pennington immunity is lost only in exceptional circumstances: when
`
`the challenged action is both (1) “objectively baseless in the sense that no
`
`reasonable litigant could realistically expect success on the merits” and (2)
`
`“brought with specific intent to further wrongful conduct through the use of the
`
`governmental process – as opposed to the outcome of that process.” Nader, 555 F.
`
`Supp. 2d at 156 (emphasis added) (citing Prof’l Real Estate Investors, Inc.
`
`(“PRE”) v. Columbia Pictures Indus., 508 U.S. 49, 60-61 (1993)).
`
`With respect to the first prong, PO’s brief does not criticize the merits of
`
`CFAD’s petition, let alone establish that it is “objectively baseless.” FilmTec Corp.
`
`v. Hydranautics, 67 F.3d 931, 938 (Fed. Cir. 1995). For this reason alone, PO fails
`
`to overcome Noerr-Pennington’s protection afforded to CFAD’s petition.
`
`
`
`When the first prong of the exception is not established, the subjective
`
`(second) prong need not be considered. PRE, 508 U.S. at 60. Indeed, the “sham
`
`exception does not extend to genuine attempts to secure government action, even
`
`though the defendant harbors wrong intent.” Nader, 555 F. Supp. 2d at 157; Bill
`
`Johnson’s Restaurants, Inc. v. National Labor Relations Board, 461 U.S. 731, 743
`
`(1983) (“The filing and prosecution of a well-founded lawsuit may not be enjoined
`
`as an unfair labor practice, even if it would not have been commenced but for the
`
`
`
`7
`
`
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`plaintiff’s desire to retaliate against the defendant for exercising rights protected by
`
`the Act.”).
`
`
`
`Regardless, PO also fails to meet the subjective prong. PO attempts to
`
`escape the Noerr-Pennington doctrine by asserting that CFAD misrepresented the
`
`patent exclusivity of GATTEX to move the market in support of a short sale. (PO
`
`Br. at 2-3, 11.) PO, however, cites no actual statement by CFAD about GATTEX
`
`patent exclusivity. PO cites only inadmissible articles and twitter accounts, but
`
`even those hearsay documents say nothing about GATTEX or PO. (See e.g.,
`
`Exhibits 2019, 2020, 2022, 2021, 2022 and 2023.) Thus, PO has no evidence of
`
`any representation by CFAD regarding GATTEX exclusivity, much less a
`
`misrepresentation.
`
`PO argues that it will keep its patent exclusivity regardless of the outcome of
`
`this IPR because CFAD has not filed a petition for IPR against the latest-expiring
`
`patent listed in the FDA’s Orange Book (“OB”) for GATTEX. On this basis, PO
`
`argues that any representation by CFAD must be a misrepresentation. (PO Br. at 2-
`
`3). PO ignores the obvious reality that invalidation any of GATTEX OB patent
`
`could increase competition by, for example, providing generic manufacturers with
`
`fewer patents to design-around and reducing the number of patents that generic
`
`manufacturers would need to challenge. PO confirmed this reality when it admitted
`
`that it “may not be successful in asserting [its] proprietary rights, which could
`
`
`
`8
`
`
`
`result in [its] patents being held invalid or a court holding that the third party is not
`
`infringing, either of which would harm [its] competitive position.” (Ex. 1035 at p.
`
`38)(emphasis added). PO not only lacks proof that CFAD made the purported
`
`representations about its “patent exclusivity,” but PO’s own public SEC filings
`
`show a successful IPR challenge could shorten GATTEX’s patent exclusivity.
`
`PO also improperly seeks to turn the Board into a securities regulator, citing
`
`a securities statute and an SEC Rule. (PO Br. at 6.) Yet, PO does not even allege
`
`the elements of a claim under the authorities it cites.2 PO has not and cannot make
`
`those allegations in good faith. As explained by Professor Marc Steinberg, even if
`
`what PO alleges about CFAD’s strategy and statements were true, the strategy and
`
`statements are legal and do not amount to anything improper, much less securities
`
`fraud. (Ex. 1036.) PO’s securities fraud arguments are thus deficient under 37
`
`C.F.R. 11.18(b)-(c), and CFAD requests that this portion of PO’s submission be
`
`struck or, at a minimum, given no weight in the Board’s analysis.
`
`
`2 The elements of securities fraud under Rule 10(b) are: “(1) a material
`
`misrepresentation or omission . . . ; (2) scienter; (3) a connection between the
`
`misrepresentation or omission and the purchase or sale of a security; (4) reliance
`
`upon misrepresentation or omission; (5) economic loss; and (6) loss causation.”
`
`Halliburton Co. v. Erica P. John Fund, Inc., 134 S. Ct. 2398, 2407 (2014).
`
`
`
`9
`
`
`
`PO also suggests that CFAD’s IPR petition is improper because CFAD is
`
`allegedly motived by financial gain. (See e.g., PO Br. at 2.) Relevant case law
`
`disagrees with PO’s bald assertions. It is well-recognized that “every litigant has a
`
`personal stake in an action and, thus, a selfish motive of some sort.” Nader, 555 F.
`
`Supp. 2d at 158. To limit IPR petitions to be filed only by those with solely
`
`altruistic motives would endanger the “ability of individuals to petition the
`
`government for a redress of grievances.” Id. Indeed, PO’s proposed financial–
`
`motivation bar would implicate the motivations of every IPR petitioner, resulting
`
`in the exception swallowing the entire IPR process. Thus, there is no basis for
`
`considering CFAD’s alleged business purposes in reaching a determination on the
`
`PO’s incorrect claim of abuse of process.
`
`PO relies on its vague mantra that CFAD is engaging in a “short activist
`
`strategy” (a statement derived from inadmissible hearsay), but PO does not deny
`
`that short selling is lawful. As the SEC explained, “short sellers add to stock
`
`pricing efficiency because their transactions inform the market of their evaluation
`
`of future stock price performance.” Securities Exchange Commission, Amendment
`
`to Regulation SHO, Final Rule, Rel. No. 34-61595 (Feb. 26, 2010). Simply put,
`
`there is nothing improper about CFAD’s alleged trading practices.
`
`10
`
`
`
`
`
`
`
`PO’s Claims Are Legally Deficient in Other Respects
`
`C.
`
`PO argues that CFAD’s filing of its IPR petition constitutes abuse of
`
`
`
`process. Abuse of process, however, is directed to something else: abuse of the
`
`proceedings after they have begun. The Restatement (second) of Torts § 682 cmt. a
`
`(1977) provides that abuse of process is “not the wrongful procurement of legal
`
`process . . . it is the misuse of the process . . .” and that only “subsequent misuse of
`
`process, though properly obtained, constitutes the misconduct for which the
`
`liability is imposed.” Restatement (second) of Torts § 682 cmt. a (1977) (emphasis
`
`added). Initiating legal process is not abuse of process.3
`
`Furthermore, “there is no action for abuse of process when the process is
`
`used for the purpose for which it is intended, but there is an incidental motive or an
`
`ulterior purpose of benefit to the defendant.” Id. at cmt. b. This essentially
`
`incorporates the Noerr-Pennington doctrine into abuse of process by requiring the
`
`challenged claim to be objectively baseless before a party’s motive can be
`
`considered. PO also fails to cite a single court or agency decision where abuse of
`
`
`3 PO’s “improper use of the proceedings” argument likewise depends solely on
`
`actions during the proceedings, not the mere filing of the petition. 37 C.F.R. §
`
`42.12(7) (improper use of proceedings includes “actions that harass or cause
`
`unnecessary delay or an unnecessary increase in the cost of the proceeding”).
`
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`11
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`process has been found. See, e.g., In re Applications of High Plains Wireless, L.P.,
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`15 F.C.C. Rcd. 4620, 4623 (2000) (dismissing abuse of process claim).
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`III. Dismissal of this Proceeding as a Sanction Would Be Arbitrary and
`Capricious and would Violate Due Process
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`Were the Board to grant PO’s request to dismiss, that decision would be
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`arbitrary and capricious and would violate due process. Under “[t]raditional
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`concepts of due process incorporated into administrative law” an agency is
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`precluded “from penalizing a private party for violating a rule without first
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`providing adequate notice of the substance of the rule.” Satellite Broadcasting Co.
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`v. FCC, 824 F.2d 1, 3 (D.C. Cir. 1987) (reversing FCC’s dismissal of SBC’s
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`applications because the FCC regulation at issue was unclear). An agency “through
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`its regulatory power cannot, in effect, punish a member of the regulated class for
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`reasonably interpreting Commission rules.” Id. at 4. If the agency “wishes to use
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`[its] interpretation [of a rule] to cut off a party’s right, it must give full notice of its
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`interpretation.” Id. “Dismissal of an application . . . is a sufficiently grave sanction
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`to trigger this duty to provide clear notice.” Id. at 3.
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`Like in Satellite Broadcasting, CFAD’s interpretation of the statutory
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`standing requirements for filing a petition for IPR is reasonable. Dismissal of this
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`proceeding would impose a dramatic new barrier to IPR petitions without any prior
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`notice by rule or otherwise. Thus, such a decision would be arbitrary, capricious
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`and would violate due process. Moreover, while not raised by the Board’s
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`12
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`invitation for briefing, any action taken to dismiss the Petition or sanction CFAD
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`in response to the briefing request likely raises significant issues under the
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`Administrative Procedure Act (5 U.S.C. Subchapter II).
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`IV. The Social Benefits/Costs Favor Addressing the Merits of Petitions
`Seeking to Invalidate Poor-Quality Patents
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`
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`A.
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`The Supreme Court and Congress Have Recognized the Strong
`Public Interest in Invalidating Poor-Quality Patents
`
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`PO ignores the useful public purpose served by CFAD’s petition. Both the
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`Federal Circuit and “the Supreme Court have recognized that there is a significant
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`public policy interest in removing invalid patents from the public arena.”
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`SmithKline Beecham Corp. v. Apotex Corp., 403 F.3d 1331, 1354 (Fed. Cir. 2005).
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`There is a “strong federal policy favoring the full and free use of ideas in the public
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`domain,” Lear, 395 U.S. at 674 and “[i]t is as important to the public that
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`competition should not be repressed by worthless patents.” Pope Manufacturing
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`Co. v. Gormully, 144 U.S. 224, 234 (1892). Likewise, Congress implemented
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`administrative challenges to patents, such as IPR, to “ensure that poor-quality
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`patents can be weeded out through administrative review rather than costly
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`litigation.” 157 Cong. Rec. S5402, S5409 (Sept. 8, 2011) (Statement of Sen.
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`Schumer). CFAD’s petition puts a poor-quality patent through the crucible of IPR.
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`Regardless of CFAD’s motivation, such a petition is in the public’s interest.
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`13
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`
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`B. Members of the Public Have Expressed a Strong Interest in
`Invalidating Poor-Quality Pharmaceutical Patents through IPR
`
`
`Organizations such as AARP and health insurers have expressed
`
`
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`disagreement to Congress about proposed legislation that would shield or “carve-
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`out brand name drug manufacturers from the inter partes review (IPR) process.”
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`(Ex. 1037 at 1.) Their well-founded concern focuses on the “widely-used practice
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`known as ‘evergreening’ where manufacturers make minor modifications to
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`existing products in order to extend the patent protection for years.” (Id.)
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`“Evergreening results in substantial additional spending on prescription drugs that
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`do not measurably improve quality of care.” (Id.)
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`The Center for Economic Policy Research (“CEPR”) studied this issue and
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`concluded that “the IPR process appears to be an effective mechanism for quickly
`
`removing dubious patent claims before they impose major costs on the economy”
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`and that exempting pharmaceutical patents from the IPR process could cost the
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`public as much as an additional $220 billion over the next 20 years. (Ex. 1038 at
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`1.) Thus, the ability of anyone to challenge the validity of pharmaceutical patents
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`through IPR is “a critical consumer protection against abusive patent extensions
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`that limit patient access to more affordable treatment options, delay market entry of
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`less expensive generic therapies, and drive up drug costs.” (Ex. 1037 at 1.)
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`
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`PO’s ‘886 patent is a prime example of abusive patent evergreening. The
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`‘886 patent claims are known and obvious compositions and methods of making
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`14
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`and administering an already-patented drug. Indeed, the original patent on
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`GATTEX expires on April 16, 2016. The ‘886 patent seeks to extend the patent
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`exclusivity of GATTEX by six years. (Ex. 1039.) A decision on the merits affords
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`an opportunity to remove the ‘886 patent from the public arena, opening
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`competition and speeding the entry of a less expensive generic product. GATTEX
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`is priced at about $300,000 per patient per year—making it one of the most
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`expensive drugs on the market. (Ex. 1040.)
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`
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`Dismissing the petition without reaching the merits and precluding entities
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`like the CFAD from filing IPRs essentially ensures that poor-quality patents will
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`remain immune from the IPR process. Few, if any, consumers have the financial
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`wherewithal to challenge poor-quality pharmaceutical patents. Lear, 395 U.S. at
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`670. Thus, regardless of CFAD’s business form or motivation for challenging the
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`validity of the ‘886 patent, the challenge serves an important public interest: it
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`opens the door to fair competition through a process that is unaffordable to those
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`who will benefit most.
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`CONCLUSION
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`CFAD respectfully requests that the Board not dismiss the above-captioned
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`proceedings for abuse of process, and that the Board proceed to hear this Petition
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`on the merits.
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`* * * *
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`15
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`Respectfully submitted,
`
`By:/Jeffrey D. Blake/
`
`Jeffrey D. Blake Esq.
`Matthew L. Fedowitz, Esq.
`MERCHANT & GOULD P.C.
`191 Peachtree Street N.E., Suite 4300
`Atlanta, GA 30303
`JBlake@merchantgould.com
`MFedowitz@merchantgould.com
`Main Telephone: (404) 954-5100
`Main Facsimile: (404) 954-5099
`
`Counsel for Petitioner
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`Date: September 21, 2015
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`16
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`CERTIFICATION OF SERVICE
`The undersigned hereby certifies that “PETITIONER’S BRIEF IN
`RESPONSE TO THE BOARD’S REQUEST FOR ADDITIONAL BRIEFING
`PURSUANT TO 37 C.F.R. § 42.20(d)”, “PETITIONER’S UPDATED EXHIBIT
`LIST”, EXHIBITS 1035-1040 and “CERTIFICATE OF SERVICE” for the above-
`captioned matter were served in their entirety on September 21, 2015, upon the
`following parties via electronic mail:
`
`Joseph R. Robinson
`Heather Morehouse Ettinger
`Troutman Sanders LLP
`The Chrysler Building
`405 Lexington Avenue
`New York, NY 10174-0700
`joseph.robinson@troutmansanders.com
`heather.ettinger@troutmansanders.com
`
`Dustin B. Weeks
`Troutman Sanders LLP
`Bank of America Plaza
`600 Peachtree Street NE, Suite 5200
`Atlanta, GA 30308-2231
`dustin.weeks@troutmansanders.com
`
`
`Respectfully submitted,
`MERCHANT & GOULD, P.C.
`
`
`
`/Jeffrey D. Blake/
`Jeffrey D. Blake, Esq.
`Registration No. 58,884
`MERCHANT & GOULD P.C.
`191 Peachtree Street N.E.
`Suite 4300
`Atlanta, GA 30303
`jblake@merchantgould.com
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`ATTORNEYS FOR PETITIONER
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`17
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`Dated: September 21, 2015
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